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What Do Young Venture Capitalists Do All Day?

Venture capitalists (and venture capital funds) are in the business of investing in young, innovative companies (often in the tech and healthcare sectors) in exchange for an equity stake that hopefully can be translated into a profit when the company goes public or is merged with or sold to another company.

And so, in order to be successful, venturecapitalists are always on the lookout for growth companies. This means digging down on specific data to assess opportunities. It means asking probing questions: What’s happening to the cost of storage and bandwidth that could make cloud storage and collaboration cost-effective now? How are pharma marketers allocating their advertising dollars? Is this founder well-suited to lead a high-growth business? It also means doing a lot of research, including picking up the phone and talking to current management experts.

But how does all that (and more) translate into day-to-day, even hour-to-hour responsibilities? For the answer, below we bring you a typical day in the life of a venture capital analyst (that is, a young venture capitalist).

6:00 a.m.: Wake up and check my e-mail for any overnight developments. Then I hit the Internet to read business headlines, scanning Web sites such as The Wall Street Journal and The New York Times Dealbook site.

7:00 a.m.: I arrive in the office and begin replying to e-mails. Then I take a more in-depth look at the financial news, paying specific attention to major publications like The Wall Street Journal and Financial Times. I also read various trade publications, both online and in print, that cover my specific area of coverage and take notes regarding new ideas and companies that might be good candidates for a capital infusion.

8:00 a.m.: With names of people and companies culled from my research, I use the Internet to locate information and contact details on them. I check my firm’s internal database to see if someone else on my team has contacted the companies, then create files for the ones that hold potential and send myself an e-mail as a reminder to call them during business hours.

9:00 a.m.: Respond to e-mails and voice mails from the day before. The people I’m communicating with are primarily entrepreneurs, other venturecapitalists, and personal acquaintances.

9:30 a.m.: Attend a morning staff meeting with the general partner assigned to my area, where I give a quick rundown on some interesting stories in the news that might impact the sector I cover. Also, I use this opportunity to gauge the general partner’s interest by providing the names of a few ideas or companies that might be seeking funding.

10:00 a.m.: Meet with a group of entrepreneurs who want to make their pitch. I read the business plan for five minutes. One general partner (GP) sits in with me. The other GP, who planned to be there, cannot make it because he has a conference call with a portfolio company facing some challenges. I sit politely through the presentation and identify the three critical issues facing the company. During the question and answer phase, I think of how to politely extract more information about those three issues, all the while evaluating whether I would want to work with this team or not.

In the end, I decide to make some calls to gather more information about the market, or a competitor, but I feel that there’s a very low probability I’d ever invest. I wish I could just kill the deal, but the management team is reasonable (though not great), the customer need they have identified may actually exist (I don’t know first-hand, so I’ll need to call around), and I may learn something by taking it to the next step. Plus, in the back of my mind, I know the market for good deals is very competitive, and you don’t want to reject a deal too quickly.

11:00 a.m.: Phone the people who called during the meeting. These people include entrepreneurs, analysts, other venturecapitalists, and my lunch appointment. A colleague tells me that the company I almost invested in two months ago just got funded by a competing firm. I wonder if I made a mistake. I find out from an entrepreneur I was hoping to back that he wants his son to be a co-founder and owner of the firm. I abandon all hope. An analyst informs me that AT&T has decided to stop its trial of a new technology because it doesn’t work, which creates an opportunity for companies with an alternative solution. I think of two small companies, one in Boston and one in Denver, which have alternative solutions, and make a note to call them to get a status report.

12:30 p.m.: Lunch with a small business I’d reached out to a few months ago about their interest in receiving some venturecapital. The company has already shopped its idea to a few other firms, and I’m hoping to gauge their interest and hopefully woo them. This could be the final step before I arrange a meeting between the company and my firm’s general partners. Bringing in a hot new client is a major coup for any analyst—and they’re interested.

2:00 p.m.: Get back into the office and write up a report on the new company I just had lunch with, including all the relevant information, how much funding they’re looking for, and my analysis of the company’s potential. Once the report is complete, I forward it to the general partner and arrange a time for the company to come into the office.

3:00 p.m.: A partner and I meet with a portfolio company on a conference call. I helped bring this company to the firm and know them well. Unfortunately, it’s facing some challenges and I offer to screen executive recruiters to help it find a new CFO. The GP offers to talk to two M&A firms to get a first opinion about what might be done to sell the company over the next six months. At the end of the call, the GP gives me three names and numbers of recruiters, which I add to my own contacts.

4:30 p.m.: I make due diligence calls for a potential investment I’ve been following for two months. Last week I called the company’s customers, and they seemed happy for the most part. Today, I call the personal references of the management team. The idea is to get as much negative information as possible. The goal is to discover any potential character or personality flaws any member of the team may have. VC firms are “due diligence machines,” doing the hard work of making sure a company is what it says it is.

5:00 p.m.: A conference call is scheduled with a company that my boss has asked me to research. After about 30 minutes on the call, I determine that it doesn’t fill the criteria my firm is looking for. However, once the CEO has explained his business plan, I begin to ask about competitors. During the course of the conversation, I find out about other companies that might fit the firm’s criteria.

5:30 p.m.: Calls to the West Coast. I also check my stocks, confirm dinner plans, and surf the Web to gather information about the technology areas I cover.

7:00 p.m.: Dinner with two other young venturecapitalists downtown. We talk mostly about life, sports, travel, and relationships, but also about the latest deals, cool business ideas, and recent successes. I learn that a competing firm just made 30 times its money on a deal I never saw. I also find out that a company I turned down, which was invested in by someone else, is about to go bankrupt. A train missed; a bullet dodged.